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Inequitable Conduct

March 31, 2013

Mr. and Mrs. Gabbai live in Ashdod. They developed a three-layer mattress, which they asserted helps prevent sudden infant death syndrome (SIDS). In 2007 they filed a US patent application on their mattress, which eventually issued as US 8065767. The corresponding Israel case, application no. 179840, didn’t fare as well: although allowed by the Examiner, the application was rejected by the Deputy Commissioner in pre-grant opposition proceedings instituted by Aminach, a well-established local mattress manufacturer. There are several aspects of the decision worth noting: first, the basis on which the application was (and was not) ultimately rejected; and second, the award of attorneys’ fees given to Aminach.

Aminach asserted that the patent shouldn’t be granted because (a) the Gabbais breached their duty of disclosure (by failing to provide the ILPTO with the publications cited by the USPTO examiner), (b) the claims were unclear, (c) the invention was neither novel nor inventive, and (d) the invention lacked utility.

Despite acting pro se (and, unsurprisingly, making numerous mistakes along the way as a result, e.g. attending the hearing at the ILPTO without being prepared to cross-examine one of Aminach’s witnesses), and despite the fact that Aminach was represented by one of the largest IP firms in Israel, the Gabbais managed to successfully parry most of these assertions. With respect to the non-disclosure of the references from the USPTO, the Deputy Commissioner noted that deliberate concealment is one of the requirements for sanctioning an applicant for non-disclosure, and she ruled that since Aminach hadn’t provided any evidence to show that the non-disclosure was deliberate, she had to find for the Gabbais on this point. Likewise, she found that the invention was novel and inventive over the prior art cited by Aminach.

What the Deputy Commissioner found lacking was utility. The Gabbais had asserted in their application that the mattress reduced the incidence of SIDS. Aminach’s expert witness, a physician, pointed out that there was no evidence in the application or even provided by the Gabbais later that showed that the mattress in fact achieved this result. Since the Gabbais were deemed not to have submitted their own evidence (because their evidence was filed as a letter rather than an affidavit), and their cross-examination of Aminach’s expert wasn’t terribly successful, the Deputy Commissioner ruled that that invention lacked utility and was therefore unpatentable.

The difficulty with that determination is, of course, that no one disputes that the mattress actually worked as a mattress. That alone is sufficient to qualify for utility under section 3 of the statute: “An invention, whether a product or process, in any technological field, which is new, useful, susceptible of industrial use and inventive, is a patentable invention.” Whether or not the mattress worked to reduce SIDS is (or should have been) immaterial. By stressing in their patent application that the mattress reduced in the incidence of SIDS, the Gabbais opened themselves to obfuscation of this point by Aminach’s attorneys. Had the application merely described what the invention is – viz., a mattress having a particular construction – without singing its praises, it is doubtful that the Deputy Commissioner would have been duped into agreeing that the invention lacked utility.

(Having determined that the invention lacked utility, the Deputy Commissioner didn’t rule on the clarity of the claims.)

No less remarkable was the awarding of 40,000 shekels (over US $10,000) in attorneys’ fees to Aminach. Aminach actually asked for over 140,000 shekels in fees, but refused to provide its attorneys’ billing sheets on the grounds that these were privileged. The Deputy Commissioner ruled that the billing sheets were not privileged documents, and that their non-production left the Gabbais without an opportunity to challenge the billings; nevertheless, she awarded 40,000 shekels on the basis of “the evidence and pleadings filed by the opponent, the fact that the applicants didn’t file their own evidence, and the great savings incurred by the fact that the summations were presented orally rather than in writing [as is the norm in Israeli legal proceedings – DJF]”.

Perhaps the Deputy Commissioner felt that she was doing the applicants a favor by awarding significantly lower fees than the prevailing party requested, but it’s still a slap in the face: you file a patent application on an invention which is novel and inventive, you nevertheless lose in an opposition, and then you have to pay the other side? It should also be borne in mind that just a few years ago, an award of 40,000 shekels was unthinkable – an award of just 5,000 shekels would have been considered sizeable. The request for 140,000, and the granting of 40,000, are clearly the result of the ILPTO’s trend to grant attorneys’ fees award far in excess of what real courts of law themselves actually award.

If anything, the fee award in this case will discourage inventors with little money from seeking to commercialize their inventions or otherwise disclose them in patent applications – why bother to do so if a better-funded competitor hire some good lawyers to sell the ILPTO a load of baloney not only to prevent you from getting a patent you deserve, but to also convince the ILPTO to tell you have to pay for your competitor’s lawyers?

(For those of you who read Hebrew, the transcript of the hearing before the Deputy Commissioner, as well as the letter the Gabbais sent to her the day after the hearing, both of which can be viewed on the ILPTO’s web site, make good reading if you’re looking to illustrate why acting pro se is usually a bad idea.)

August 22, 2012

In accordance with recently-adopted statutory
amendments, next week the Israel PTO will begin
publishing all pending patent applications that have passed the 18-months-from-earliest-priority date. This includes applications filed under the old law, under which applications were only published (actually, opened to the public) upon conclusion of substantive examination and payment of a publication fee. There is no opt-out provision for applicants who filed before the enactment of the amendments, so short of abandoning their applications a month or so in advance of early publication, applicants who filed under the old law have no way to stop such publication.

Because until now Israel did not have 18-month publication, it was possible to file in both Israel and the USA and to still make a non-publication request in the latter country. Which raises the question, if you’re an applicant who filed in Israel under the old law, and your only other corresponding application was filed in the U.S.A. with a non-publication request, will publication in Israel now subject you to the draconian penalty associated with making an improper non-publication request, viz. abandonment of the U.S. application? In other words, do you now have to inform the USPTO Director of the filing in Israel and/or rescind that non-publication request?

It’s not clear that either step is necessary. The relevant parts of the statute are 35 U.S.C. §122 (b)(2)(B) sub-sections (i), (ii) and (iii):

(B)(i) If an applicant makes a request upon filing, certifying that the invention disclosed in the application has not and will not be the subject of an application filed in another country, or under a multi¬lateral international agreement, that requires publica¬tion of applications 18 months after filing, the application shall not be published as provided in para¬graph (1).

(ii) An applicant may rescind a request made under clause (i) at any time.

(iii) An applicant who has made a request under clause (i) but who subsequently files, in a foreign country or under a multilateral international agreement specified in clause (i), an application directed to the invention disclosed in the application filed in the Patent and Trademark Office, shall notify the Director of such filing not later than 45 days after the date of the filing of such foreign or international application. A failure of the applicant to provide such notice within the prescribed period shall result in the application being regarded as abandoned, unless it is shown to the satisfaction of the Director that the delay in submitting the notice was unintentional.

So per sub-section (i), for the non-publication request to have been proper, it needed to indicate that the invention disclosed in the US application was not the subject of an application in an 18-month publication country, and would not be the subject of such an application. Under our hypothetical, that statement was true at the time the US application was filed and the non-publication request was submitted: Israel was not an 18-month publication country, and since Israel was at the time and remained thereafter the only country apart from the US in which the application was filed, at the time the non-publication request was made there was no filing in an 18-month publication country nor any intent to file in an 18-month publication country. So the certification made along with the non-publication request was truthful, and the requirements of sub-section (i) were met.

The question then becomes, what does the statute say about the applicant’s obligations as a result of things that occur subsequent to the filing of the non-publication request? To the extent that the statute speaks to such situations, it does so in sub-section (iii). But that sub-section only addresses one such situation, namely the case in which, after filing in the US with a non-publication request, the applicant files in an 18-month publication country, in which case the applicant must inform the USPTO Director within 45 days of the foreign filing that such filing has been made. Failure to do so results in the application being regarded as abandoned. But sub-section (iii) is silent as to what happens if someone files in a non-publication country and that country later becomes a publication country – there is no mention of an obligation to report, let alone any penalty associated with a failure to report. That being the case, the logical conclusion is that in our hypothetical, there is no obligation to report to the Director the fact that the Israel application is now going to be published.

It could be argued that while the letter of the law doesn’t cover our hypothetical, the spirit of the law says that the applicant should now inform the Director of the changed situation, or simply rescind the non-publication request, in order to facilitate publication of the US application, since the idea was to enable non-publication in the USA only if there was no 18-month publication elsewhere. And undoubtedly, if the US application is not published until it issues as a patent, that argument will be made by the defense should an attempt to enforce such a patent be made. Nevertheless, that argument does not accord with the actual wording of the statute.

I have not undertaken a study of the legislative history of §122 to see if it sheds any light on the situation. Lawyers tending to be a risk-averse group, I’m guessing that attorneys counseling clients facing this situation would advise them to rescind the non-publication request, if only because, by virtue of market size, US patents tend to be more valuable than Israel patents, making the risk in maintaining non-publication unacceptable. But that’s merely a guess: fortunately for me, I don’t represent anyone whose US non-publication request may be affected by the change in Israel law.

November 19, 2010

There’s a term in Jewish law called “migo”. Inter alia, this term is used to denote a situation in which a witness is believed because, although his testimony is not as complete or convincing as might be desired, if he were going to lie, he could have come up with a far better fib. So it was interesting to see a CAFC decision last week in which the Court employed similar logic in reversing a District Court with regard to inequitable conduct.

The case in question is Cancer Research Technologies v Barr Laboratories. I posted about the Delaware District Court’s decision in this case last January: in the context of ANDA litigation, Barr stipulated to the validity and infringement of the asserted claims of CRT’s US 5,260,291, but argued that the patent was unenforceable for both prosecution laches and inequitable conduct. The former argument was based on the fact that over a period of ten years, the applicant had repeatedly obtained extensions and filed continuations without substantively advancing prosecution; only after the entrance into the picture of a deep-pocketed partner, Schering, having the wherewithal to bring a candidate compound through clinical trials, did the applicant proceed in 1993 to respond to the Examiner in a substantive way. The latter argument centered on the fact that although one of the inventors had published multiple articles describing negative test results for the claimed compounds, he had not seen fit to provide those results to the USPTO.

The district court found for Barr on both counts. On the laches prong, the court ruled that since CRT’s 1993 response was based on 1986 case law, CRT could have replied substantively much earlier in prosecution; that the only reason for delay was CRT’s attempt to find a strategic partner to help commercialize the drug; and that this was not a sufficiently good reason to delay prosecution. In reaching this conclusion, the District Court rejected CRT’s claim that under Supreme Court and CAFC case law, a party asserting a prosecution laches defense must show that during the period of prosecution delay, the defendant had begun to work the invention or made preparations to do so, i.e. the defendant had secured “intervening rights”. On the inequitable conduct side, the District Court ruled that test results showing that some of the compounds identified in the application as being “particularly active” were actually inactive were highly material to patentability, and that the withholding of such results from the USPTO, in particular when the inventor had published them elsewhere, implied intent to deceive the USPTO.

Last week, in a 2-1 decision, the CAFC reversed on both grounds. Regarding laches, the majority (Judges Newman and Lourie) held that Supreme Court precedent established that “intervening rights” were a necessary component of a laches defense, and that those intervening rights must be established by the defendant during the period of prosecution delay. Since Barr had not made preparations for copying the API during the period of prosecution delay, Barr had not obtained “intervening rights”, and thus could not avail itself of the laches defense.

Writing in dissent, Judge Prost asserted that the proper test for prosecution laches was a totality of the circumstances test, not a test requiring proof of the accused infringer being prejudiced during the period of delay. This, said Judge Prost, was not what Supreme Court or CAFC precedent required:

“By requiring this particularized prejudice, the majority sidesteps the real harm at issue in this case. The Supreme Court has explicitly recognized that delaying a patentee’s monopoly period harms the public by delaying its free use of the patented invention. Woodbridge, 263 U.S. at 48-49. Here, the applicant first filed the patent application disclosing temozolomide in 1982. By stalling prosecution for its own business purposes for nearly a decade, Cancer Research obtained a patent which does not expire until 2014--almost thirty-two years after the first application in this chain was filed. The majority downplays the public prejudice caused by this delay, 2 Maj. Op. at 12-13; however, Cancer Research’s conduct has prejudiced the public by extending its patent monopoly over temozolomide. Indeed, Congress has specifically recognized the public’s interest in obtaining affordable prescription drugs by enacting a regulatory scheme to expedite the availability of generic drugs."

The problem with Judge Prost’s dissent is twofold. First, in assessing laches, she would rely on an alleged harm to an amorphous public. But it’s not clear that the court’s focus should stray beyond the scope of the actual litigants before the court to consider effects of the prosecution delay on the general public. Whereas a litigant can explain to the court the particular harm he has suffered as a result of the prosecution delay, assessing harm to the general public, which usually is not directly represented before the court, can be an iffy proposition. (That’s part of the reason there are rules on standing and justiciability.) The “accused-infringer-must-have-aquired-intervening-rights-during-the-period-of-delay” rule set forth by the majority circumscribes the court’s purview of the laches argument to the litigants before it.

Second, even if one were to accept that the rationale Judge Prost proffers for the laches doctrine – namely that “by delaying [the public’s] free use of the patented invention”, the patentee has harmed the public, and should therefore be penalized by having his patent treated as unenforceable – is applicable in principle in all cases, nevertheless that rationale only applies if there actually is a commercial product for the accused infringer to make and for the public to benefit from. That’s not the case here. Judge Prost completely misses the point, fully (and unsurprisingly) appreciated by Judges Newman and Lourie, that in this case, without a patent, there never would have been a new drug, period, let alone a new drug that generic copyists could make at low price later on.

Put differently, the patentee’s prosecution delay engendered no delay of the public’s use of the patented invention, because without the patent there wouldn’t have been any use at all: the molecule would still be sitting on a shelf somewhere. The laches doctrine shouldn't be applied where, as here, there is no prejudice to the public at large or competitors in particular, let alone where the public benefit from the patent flows directly from the fact that there was prosecution delay.

Nevertheless, one wonders if the majority’s test isn’t too restrictive, and if the majority could have fashioned a test that would enable competitors to prevail on a prosecution laches defense even when they did not obtain “intervening rights” during the period of prosecution delay. But discussion of that thought is deferred to a later post.

As to inequitable conduct, the majority ruled that although data showing some claimed compounds to be inactive were material to patentability, the District Court erred in relying solely on the non-disclosure of that data to the PTO to infer intent on the part of the inventor to deceive the PTO. The error was that

“materiality and intent are separate requirements, and intent to deceive cannot be found based on materiality alone…A court cannot simply infer that an applicant ‘should have known’ the materiality of withheld information and thus intended to deceive the PTO because the applicant knew of the information and the information is material. A district court must find some other evidence that indicates that the applicant appreciated the information’s materiality…In this case, evidence that Stevens co-authored articles that contradict the disclosure of the ’291 patent specification does not alone establish that Stevens with-held those studies intending to deceive the PTO.”

Furthermore, said the panel, intent to deceive must be the single most reasonable inference that can be drawn from the evidence adduced. Here, the panel found that

“While publication to the scientific community is not the same as disclosure to the PTO and does not foreclose a finding of deceptive intent…the prompt publication of data in multiple articles over the entire course of prosecution is inconsistent with finding that intent to deceive is the single most reason-able inference to draw from the evidence in this case…”

That sounds an awful lot like “migo”: if the inventor wanted to pull a fast one on the PTO, why on earth would he have published several articles showing that certain compounds were inactive? He should have just kept his data secret. His public disclosure of that data, even if not to the PTO, does not evince deceptive intent.

The panel also noted that the inventor did not withhold from the PTO only information about the inactivity of certain compounds; rather, “the withheld information includes both positive and negative data regarding the claimed tetrazine derivatives”. Thus, concluded the majority, “an equally reasonable inference to draw from the evidence is that Stevens viewed publication of all the data as important to his career as a scientist but did not appreciate their potential importance to the patentability of the tetrazine derivatives patent claims.” Without a finding of intent to deceive, there was no basis for finding inequitable conduct, and the district court’s decision was reversed in this regard as well.

In dissent, Judge Prost asserted that had the withheld information been before the PTO, the scope of the claims would have been affected, a fact that even the majority would acknowledge; that the majority erred in requiring separate evidence for materiality and intent; that “the evidence presented at trial separately supports the district court’s findings on both prongs”; and that “when combined with the district court’s credibility findings regarding Dr. Stevens’s ‘explanation’ for his failure to disclose, is absolutely sufficient to support the conclusion that highly material evidence was withheld from the PTO with intent to deceive.” As to the most reasonable inference to be drawn from the evidence, the judge believed, apparently on procedural grounds, that it was not for the appellate court to second-guess the district court in this regard: “We should not draw inferences that the district court has already excluded based on its own credibility findings with respect to Stevens’s explanations for the withholding.”

When discussing the district court case, I stated that the fate of the inequitable conduct finding would “hinge in no small part of the CAFC judges assigned to this case”. It is hoped that the CAFC’s forthcoming en banc decision in Therasense will make inequitable conduct outcomes more judge-independent, by relegating this defense to cases in which there is actual fraud on the PTO.

November 17, 2009

In order to represent others in patent matters before the USPTO, one has to be admitted to such practice by the USPTO, even if one is already a lawyer admitted to a state bar.Practicing in patent matters on behalf of others without a license can result in fines (35 U.S.C. §33) or, if false statements are involved, imprisonment (18 U.S.C. §1001).Yet at the same time that U.S. citizens are required toe the line, pay for and pass the USPTO registration examination, and follow the USPTO’s rules in order to represent clients before the USPTO, the USPTO allows foreign citizens to practice before it without a license and without the threat of repercussions.

How does this come about?Well, the first thing one needs to do is acquire a USPTO customer number.Although typically one or more practitioner numbers are associated with a customer number, you don’t need a practitioner number to get a customer number, and you don’t need to provide a U.S. address.So if you’re a foreign practitioner registered, in say, Israel, but not registered in the USA, you can still get a USPTO customer number, e.g. 36131 or 63426.

Next, you tell your clients that they can save money by avoiding the use of a U.S. associate and filing directly at the USPTO.Since you yourself aren’t licensed to practice before the USPTO, you can’t sign the papers on their behalf; maybe you tell your clients this piece of information, maybe you don’t.It doesn’t really matter, since any inventor can act pro se, so you can pull a fast one the USPTO: you prepare and file all the forms and substantive papers yourself, but you have the inventor(s) sign the papers themselves (maybe; see discussion below), so that, to the USPTO’s eyes, it appears that the inventors are prosecuting their own applications.Of course, there’s the minor fact that the customer number associated with the filing of the papers has a name and address that are completely different from the name and address of the inventors, but it never crosses the mind of anyone at the USPTO that the person whose name is associated with the customer may de facto be acting as the agent for the inventors.

Even better, it appears that no one at the USPTO checks to see that the papers are actually signed, so you don’t really need to get the inventors’ signatures.You can just type their names on the papers in your word processor, and put slash marks in front and after the typed named.Under 37 C.F.R. 1.4(d)(2), that counts as an “S-signature”, and is, apparently, acceptable.So if you look, for example, at the inventor’s declaration filed in USSN 11/619629 (20070159626), the declaration wasn’t signed by the inventor; the form was filled out and submitted by the person associated with customer number 36131, who is neither the inventor nor a practitioner registered before the USPTO.One wonders if the inventor ever saw the declaration before it was filed.

Actually, in some cases, why bother even pretending the inventor is directly involved at all?If you’re filing a provisional, for which no declaration is required, you can do everything yourself.Thus, for example, provisional application no. 60/597171, which served as the priority document for USSN 12/088096 (20080265144), was filed using a transmittal form in which the person submitting the correspondence admitted that the use of the electronic filing system “is for OFFICIAL correspondence between patent applicants and their representatives and the USPTO.Fraudulent or other use besides the filing of official correspondence by authorized parties is strictly prohibited, and subject to a fine and/or imprisonment under applicable law.”However, the person submitting the paper was neither the applicant nor a person authorized by the USPTO to represent others in patent cases.

Or maybe you can actually get the inventors to sign a power of attorney appointing you to prosecute their application, even though you’re not a registered practitioner.That’s what happened in USSN 11/657079 (20070173385).Actually, in that case, the applicants listed their Israeli attorney (who is not licensed before the ILPTO or the USPTO) as one of the inventors.Whether or not he actually constitutes an inventor under U.S. law is anyone’s guess, but it’s a moot point, as the application went abandoned.That may have had something to do with the well-written claims, which were rejected inter alia as being indefinite for claiming both an apparatus and the method steps of using the apparatus:

1. A method and device comprising

a) a system of weights that is removably attachable and adjustable to fit a body or part of a body,

b) the said weights attached in such a way that are in contact with the said body or said part of the body and

c) a means to fill and to empty the said weights with substances wherein the said weights are adjustable in size and in number,

whereby the said weights will strengthen the muscle, flesh or bone of the said body or part of the said body, and/or lose fatty tissue from the said body or part of the said body.

Of course, as a way of running your practice, listing yourself as an inventor when you’re probably not one under U.S. law (see, e.g. publication no. 20070169254) presents the minor problem that the validity of any patent issuing from the application is in question, but if your clients are a bunch of foreigners who don’t know any better and they pay, what do you care?

Or you can forego listing yourself as an inventor altogether, and just file a POA in which you’re appointed by the inventor, even though you yourself aren’t a licensed practitioner.(See e.g. 20070113993).The USPTO doesn’t check anyway, does it?I mean, you’ve got a customer number, right?That should be good enough.

Moreover, looking at some of these applications, they’re pathetic.It’s not just that they’re pathetically written.It’s that the “inventions” described are so obvious, the applications should never have been filed in the first place.Look, for example, at 20070008183: put a recorder in a car that records how fast a car traveled from point A to point B, to provide the police with evidence of speeding.

In view of this, my question is, why did I bother to take and pass both the USPTO and New York bar exams?Being licensed in both places puts constraints on me: I have to worry about ethics rules, and I have to be concerned about defending myself against unfounded charges of inequitable conduct if I make an honest mistake and don’t IDS some reference of questionable materiality.But if I were just Joe Shmoe foreign citizen, I could have just gotten myself a USPTO customer, and I could now de facto be representing clients before the USPTO with impunity, without fear of reprisals for any malfeasance on my part.

Maybe this is just another variation of the maxim, no good deed goes unpunished, and I, like thousands of other registered practitioners, was a sucker for getting my USPTO registration number.But, cynical as I sometimes am, I would still hope that USPTO would take steps to prevent such behavior, and to stop punishing those of us who play by the rules.Letting non-registered practitioners practice before the USPTO cuts into our livelihood; it also deprives some inventors with genuinely good ideas competent representation before the USPTO.

My suggestion for what the USPTO could do to clean up this mess?It should require:

(a) in the case of a lone inventor, either the address associated with customer number is the same as the address of the inventor, or there is at least one registered practitioner associated with the customer number; and

(b) when there are joint inventors, either all the inventors are associated with the customer number (and not just one inventor is associated with the customer number), or there is at least one practitioner number associated with the customer number.

I don’t know how much of a headache it would be for the USPTO to implement this, but it would go a long way toward preventing unwary overseas applicants from being duped.